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Buying property with your partner is exciting, but it's also a huge step in a relationship. To avoid future financial complications, let's take a look at how to structure your home loan, property ownership and more.
From inspecting potential new homes to coming up with interior design plans, buying property with your partner is an exciting time. However, it’s also a huge step in the relationship, with landmines along the way that should be deactivated before you jump in. A relationship break-up is the most obvious issue, along with current and future financial implications for you both.
Let’s take a look at what you need to know, so you can get back to those design plans.
The way you structure your home loan and property ownership makes all the difference when it comes to potential issues in the future. No one wants to think that one of those issues could be the end of a relationship. However, we can’t predict the future, so asking the hard questions now is the best way of protecting yourself from anything going wrong down the track.
There are different ways you can own property together and, depending on your circumstances, it’s best to choose the right one from the beginning.
If you and your partner feel like you’re seriously in it for the long haul, becoming joint tenants might be the way forward for you. It means that you both have an equal interest in the property, regardless of who pays the deposit or whether or not it’s an equal amount. You’re also equally entitled to any income the property makes and jointly responsible for any costs it acquires.
If one of you passes away, the other receives entire ownership of the property and this applies even if someone’s will states otherwise. The biggest issue with joint tenancy usually arises if one of you wants to sell the property in the future, but the other doesn’t. You’ll need to jump through a lot of hoops in order for the sale to go through and splitting assets can be hard, as you both own everything.
You’re also equally entitled to any income the property makes and jointly responsible for any costs it acquires.
Becoming tenants in common offers more flexibility, in terms of individual finances, which often suits couples with unequal deposits or ongoing funds to contribute. This is because you split ownership of the property and are only responsible for your contribution. In terms of receiving income, you’re entitled to your share based on the percentage that you own, rather than the entire amount. Also, your share can be left to someone else, in the event of your death.
Discussing an exit strategy doesn’t mean you’re expecting doom and gloom for your relationship. It’s simply a smart way to approach structuring your loan. From the beginning, talk about future aspirations, who might get the property in the event of a breakup and what your expectations are. Think about your mortgage agreement, in terms of who’s liable to pay if one of you can’t for some reason.
Seeking professional financial help is the best way to keep it all firmly in the realm of smart investment choices, to ensure you’re protected in the future, no matter what.
What you need to know when buying property with your partner:
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